If Your House is Worth Less Than You Owe, Let’s Talk About a Short sale

The process of selling your house is stressful enough in a normal situation, but in the event of a short sale the process may seem completely overwhelming. First, what is a short sale you ask? Simple, if you owe more on your house that it is worth, you should consider a selling it for less than is owed.  Or, perhaps you have lost your job and foreclosure is inevitable.  Both of these life stressors can be alleviated by selling your house and moving on.  Of course, in order to do this successfully, you need the cooperation of your lender.

Next question – why bother? Easy, a short sale has a much less negative impact on your credit than either deeding it back to the bank, or losing it in foreclosure.  In other words, it is in your best interest to be proactive when you are faced with negative equity or a job loss.

First, talk about the options with us.  Circumstances will vary depending on the value of your home, your lender, and any other liens on your property.  In other words, do a complete evaluation of your particular hardship circumstances.  Do not make the critical mistake of waiting and hoping for better days.  Eventually the foreclosure notice will come in the mail.

  1. Understand the Process

Although there is a sharp divide in both practice and opinion, we believe being represented by an attorney is beneficial in any real estate deal, but in the case of a short sale, a lawyer experienced with short sales is critical. Once a lawyer establishes you are qualified, you will complete your lenders forms and your lawyer will communicate with the bank as well as oversee the listing and sale process.

Notice that with a short sale it’s very important to talk about a short sale BEFORE you list the property.  Other options exist, and they should all be explored with counsel before you list your home for amount of the mortgage balance and hope for the best.  A thoughtful strategy is the most successful way to short sell your home and move on.

  1. Make sure your real estate team knows what they are doing

In the event that you need to short sell your house, engaging a lawyer in advance of listing your home allows you to build the team to work together toward a common goal. Real estate agents with short sale experience are what you need.  Not an agent acting as a quasi-lawyer.  That scenario can get everyone in trouble. Short sales require a cooperative bank, a patient buyer, and a bit of luck. Experienced real estate agents will be better equipped to deal with problems as they arise and will likely be able to warn you at the beginning of the process about the most difficult parts of the process. Having a great real estate agent can also ensure you are selling your house quickly, because in a short sale price does not matter to you, only your lender.

  1. Be Patient!

Short sales require lender approval, which often is slow to come. In the event you do have an interested buyer you will need your agent working hard on the deal, but you also need to be aware the deal may fall through if your buyer finds another property.

  1. Understand what comes next

You attorney can not only help you through closing, they can also help you understand the aftermath of the sale. In the event a bank is willing to negotiate a release, you may be able to get out of any money you owe beyond the sale price of your property.  This is essential and usually the primary reason to fully participate in the sale process.  Working with an accountant or financial adviser is also something to consider to help you deal with and understand any remaining debt and/or tax consequences you may face after the short sale is complete.

If you are facing difficulties and fear foreclosure is in your future take control of the situation before it is out of control.  Evaluate your options early and often.  Surround yourself with qualified professionals.  Give us a call at Bergmann & Good if this sounds like something you need to discuss.

But I Have a Realtor, Do I Really Need An Attorney?


Every real estate transaction is different and the simple answer is: it depends. For example, in South Jersey, real estate transactions are conducted much differently than in North Jersey. So the first question is, where is the property located? If the Seller is a Giants or Jets fan, you should probably have an attorney. Eagles fans, or in other words, properties located below New Jersey Route 195 are divided on the need for representation. So for you Eagles fans out there, let’s take a look at the options:

For the Buyers:
-Is the property a distress, bank owned or short sale?
-Is the property part of an estate sale?
-Is it a commercial property?
-Is there something about the property that leaves you uneasy such as potential structural issues?
-Is it a shore property with new FEMA maps under consideration or an area you simply are not familiar with?
-Are you an out-of-town buyer?

For the Sellers:
-Are you selling a property in distress?
-Are you selling a property left to you in an estate?
-Is your co-owner no longer on speaking terms with you?
-Do you know something about the property that you are unsure how to disclose?

It should become much clearer to you now when you should hire an attorney to close your real estate deal because if you answered yes to any of the above questions, then hiring an attorney to guide you through the process would be prudent. If none of those situations apply to you, then you are probably fine to use your Realtor’s knowledge and expertise to take you through to closing. As part of a Realtor’s New Jersey licensing education they are taught the real estate contracts used within the state, and New Jersey also provides you with a three-day “attorney review period” should you change your mind, and decide to hire counsel. New Jersey also requires continuing education courses for licensed Realtors and/or certifications on subjects such as ethics, buyer’s agency, distressed property sales, etc. These measures are in place to protect all parties, buyers, sellers as well as agents. Finally, if your Realtor is acting as a disclosed dual agent, and happens to be the agent that brought the Buyer to your sale (or vice versa), it is also a good idea to consider representation. The minimal fee an attorney charges for what is typically the largest transaction in a consumer’s life, is well worth the protection of hiring an advocate whose only duty of loyalty it to you.

But what if you are selling a distressed property and you decide you need counsel. Your neighbor’s nephew is an attorney and looking for business, so maybe you should just hire her – at a minimal fee – or better yet – she may do it for free!

Of course you can hire whomever you like, but remember if you think you need an attorney for your transaction, it is probably best to hire someone with experience in that particular area of law. I have seen relatively uneventful transactions turn into not only blown up deals, but litigation where “Aunt Nancy” the criminal attorney doing a favor for her nephew makes unreasonable changes to the contract pushing the seller to cancel the deal. Or worse, when “my friend the divorce attorney” puts together the sale of his long-time friend’s commercial property – and doesn’t properly address environmental issues resulting in years of litigation. A penny saved is not always a penny earned.

Hiring a real estate attorney when needed is a smart choice. Their mission is to negotiate to make this transaction come together in a peaceful manner that is fair and amenable to both sides. A real estate attorney takes over after the selling price and terms have been established by the Realtors in the contract and all parties have signed off. He will review the contract itself, negotiate repairs based on the home inspection report, and collaborate with the title company. He will also be with you at settlement along with your Realtor and usually your mortgage broker. Think of these people, all working for you and in your best interest.
Finally, hiring a real estate attorney can typically cost from $800 – $1,000 depending on the transaction. For the die hard bargain shoppers, we are probably not a good match and I most sincerely wish you all the best. Maybe things will go smoothly and maybe they won’t, but the purchase or sale of real estate is a significant transaction that I do not recommend you enter into without experienced guidance.